Allahabad High Court
The Commissioner Sales Tax vs S/S Arease Agrovate Industries Pvt. ... on 30 September, 2005
Author: Prakash Krishna
Bench: Prakash Krishna
JUDGMENT Prakash Krishna, J.
1. These two revisions are directed against a common order dated 29th January, 1994, passed by the Sales Tax Tribunal, Kanpur in two connected second appeal Nos. 691 and 692 of 1991. The Tribunal by the impugned order has dismissed the aforesaid two second appeals which were preferred by the department
2. The dispute relates to the assessment year 1985-86 (U.P. and Central).The dealer/opposite party deals in cattle feed, mineral mixture, poultry feed and chemicals etc. The dealer/opposite party is a company registered under the Companies Act, having its Head Office at Bombay and one branch at Kanpur. The dispute in the present revisions is with regard to the taxability of "cattle poultry feed". The dealer/opposite party claimed exemption on such turnover of Rs. 16,83,262.10 of "cattle poultry feed" on the ground that the said turnover represents the sale of "cattle poultry feed" in U.P. and is exempted from payment of sales tax in view of the notification No. 7038, dated 31st January, 1985. Similarly, it claimed exemption on the turn over of Rs. 57,73,365.70 towards central sales being turnover of "poultry cattle feed," under the aforesaid notification. The assessing officer vide its order dated 14th March, 1990 did not accept the aforesaid contention of the dealer/opposite party on the ground that the products produced by she dealer/opposite party do not answer description of 'poultry feed' and 'cattle fodder' as mentioned in the aforesaid notification. However, the first appellate authority as well as the Tribunal have held that the aforesaid turnovers are liable to be exempt being cattle fodder under the aforesaid notification No. 7038, dated 31st January, 1985.
3. Heard learned counsel for the parties and perused the record.
4. The assessing officer did not accept the claim of the dealer/opposite, party with regard to exemption on the ground that the product thus produced by it is not Pashu Ahar. To arrive at the said conclusion it has taken into account the literature published by the dealer/opposite party as well as the constituents of the various products in question and its manufacturing formula as adopted by the dealer/opposite party. It found that according to notification No. 7038 the phrase "cattle fodder" means such cattle fodder as it was understood in the good olden days. It means green fodder i.e chuni, bhusi, chhilka etc. It will not include the vitamins or such other things which are fed to an animal not as a fodder but to increase the milk production capacity or to strengthen them. The assessing authority in the assessment order relating to U.P. turnover has reproduced the formula from the Literature published by the dealer/opposite party. A bare perusal of the formula would show that contents of the product thus produced by the dealer/opposite party is admixture of moisture, calcium, phosphorus, manganese, iodine, zinc, sodium chloride, cobalt, chlorine acid etc. Only a very small quantity of the product is added, as prescribed in the literature with the fodder. The product as such is not fed to animals. It supplements the food or diet of the animals. In this premises it was found that the product manufactured by the dealer/opposite party is added or mixed with the cattle fodder to give extra nourishment to animal and protect them from bacteria and is beyond the periphery of "cattle fodder" within the meaning of the aforesaid notification.
5. Without upsetting the findings recorded by the assessing authority, the appellate authorities have held that the phrase "cattle fodder" has been used in the notification in wide sense and would also include food supplement. The two appellate authorities also failed to segregate the two turnovers of "balanced poultry feed".
6. It is, therefore, necessary to have a look to the relevant entries of the notification in question. In the notification No. 7038, dated 31st January, 1985, which is under consideration, the following two entries thereof are relevant.
Entry No.5 :- Balanced poultry feed.
Entry No.10 :- Cattle fodder including green fodder, chuni, bhusi, chhilka, chokar, javi (popularly known as ghurjai) and gowar, but not including khali (oil cake), rice, polish, rice bran or rice husk.
7. It may be mentioned here that the entry No. 10 of the aforesaid notification was substituted by notification No. 3714, dated 5th June, 1985 : which reads as follows :-
Cattle fodder including green fodder, chuni, bhusi, chhilka, chokar, javi (popularly known as ghurjai), gowar, de-oiled cake, de-oiled rice polish, de-oiled rice bran or de oiled rice husk, but not including oil cake (khali), rice polish, rice bran, rice husk.
8. At the out set it may be stated here that the first appellate authority and the Tribunal both misdirected themselves and decided the appeals ignoring the fact that the balanced cattle feed and cattle fodder are two different things in the notification and they have been separately classified at entry No.5 and 10 therein.
9. The order of the first appellate authority is sub divided in six paras, out of it, up fifth para, it has noted the facts, arguments and the counter arguments of the respective parties. The discussion and conclusion is in para number six of the order. It has proceeded to resolve the issue in the light of the order of the Tribunal, delivered in second appeal No. 433 of 1989 (1984-85 Central) on 25.3.1991 in the case of dealer itself, and proceeded to decide the appeals by holding that "Balanced Cattle/Poultry Feed" has been held to be cattle fodder. It has also taken into consideration few other rulings, but missed the point that under U.P. Sales Tax, "Balanced poultry feed" and "cattle fodder" have been classified separately. The appellate authorities proceeded to decide the controversy as to whether the manufactured goods is the cattle fodder or not.
10. The dealer/opposite party is manufacturer of various products. Some of these products are exclusively meant for animals and the rest for poultry. Under the classification of turnover of different items, the dealer claimed the turnover of "cattle poultry feed" as exempted turnover. The assessing authority has recorded a definite finding that the manufactured items are neither poultry feed, nor cattle fodder. A bare perusal of the assessment order would show that the various products manufactured by the dealer/opposite party include the manufactured item for poultry farm exclusively or to feed catties only. In the assessment order the assessing officer has given the various items with the help of which the assessee manufactures the products of these items they are in the nature of chemicals and salt. For example calcium, phosphorus, cobalt, copper, iodine, zinc, iron, manganese, sodium chloride etc are the constituents of the various products manufactured by the dealer/opposite party. It further shows that the product thus, manufactured is added with the poultry feed in the case of hen (birds). Similarly the production added in cattle fodder to feed the cattle. The product thus, added with the food items of hen and cattle as the case may be in a very small quantity, say 10-15 grams per kg. The product appears to be in the nature of food supplements in order to boost up the nourishing value of the feed. The various items manufactured by the dealer may be put into two categories (i) meant for cattle; (ii) meant for hen (birds). Now the question arises as to whether the said product is to be treated as balanced poultry feed or cattle fodder within the meaning of entry Nos. 5 & 10 of the notification No. 7038, dated 31st January, 1985.
11. A bare perusal of entry No. 10 would show that inclusive definition of cattle fodder has been mentioned in' the notification. This entry has been subject matter of interpretation by this Court as well as by the Supreme Court.
12. This Court following the judgment in the case of Ram Chandra Asha Ram v. Commissioner of Sales Tax 1996 UPTC 1328, Commissioner of Sales Tax U.P.v. Ram Chandra Asha Ram 2000 UPTC 636 (SC) and Commissioner of Trade Tax v. Paras Ram Lakshi Ram (2005) 41 STR 42 has held that cattle fodder has been used in the aforesaid notification in generic sense. Treating the Sales Tax Act as on going Act it has been held that while interpreting a statute the advancement in science should be taken into account. Law should also be interpreted in such a manner to encompass the new problems that arise in a highly industrialized economy. The words cattle fodder should be understood and interpreted as it exists in the present state of affairs.
13. In TTR No.(759) of 1998 CIT v. S/S Durga Farm Product, decided on 23.9.2005, it has been held by me that the Trade Tax Act (Sales Tax Act ) is an on going statute. Any fodder fed to an animal which is not otherwise excluded in the aforesaid definition of cattle fodder mentioned in the notification in question shall be treated as cattle fodder. But howsoever, wide meaning is given to words "cattle fodder" it would not include the vitamins or such things which are not fed to an animal independent of fodder. The items manufactured by dealer/opposite party are added in the cattle fodder and then fed to animal and as such such items by themselves would not be covered within the meaning -of cattle fodder. The meaning given to phrase "Cattle Fodder" in the judgment of aforesaid cases, namely, Ram Chandra Asha Ram & Paras Ram Lakshi Ram (supra) are distinguishable on the facts. In those cases the question was as to whether such items which are fed to an animal and not excluded items as enumerated in phrase cattle fodder can be treated as cattle fodder or not. In the case in hand the product manufactured by the dealer/opposite party is in the nature of vitamins or minerals. They themselves are not fodder. These items are not administered to cattle as fodder. These items by no stretch of imagination can be called themselves as cattle fodders.
14. Learned counsel for the dealer/opposite party has placed reliance upon a judgment of Supreme Court in the case of Sun Export Corporation v. Collector of Customs Bombay and Anr. 1998 (III) STC 69. In this case the Supreme Court considered exemption notification issued under the Central Excise Act. The appellant therein imported those consignments of goods [(pre mix of vitamin AD-3 ( feed grade)] and paid the duty thereon. Later on it claimed refund of the duty on the ground that the goods imported where classifiable as "animal feed" and being so were exempted from levy of duty. In para 8 of the judgment the Supreme Court has reproduced the relevant portion of the exemption of notification which reads as follows :-
"23.01.07 Residues 'and waste of food industries (for example, inedible meat or fish flour or meal); milling residues, waste from sugar, brewing and distilling and starch industries; oil cake and other residues from oil extraction (except dregs); products of vegetable origin of a kind used for animal food, not elsewhere specified or included; sweetened forage and other prepared animal fodder...60% 29.01/45 Organic compounds including antibiotics enzymes, hormones sulpha drugs, vitamins and other products specified in notes 1 and 2 to this chapter."
...
...
(17) Vitamins ...100%, 94%
15. It also reproduced the exemption notification No. 234 of 1982, dated 1st November, 1982, wherein animal feed was defined in the following manner :-
"10. Animal feed including compound livestock feed, animal feed supplement; and animal feed concentrates:;
(b) the Explanation shall be numbered as Explanation I, and after Explanation 1 as so numbered shall be inserted, namely;, the following Explanation Explanation II For the purposes of this notification, the expressions, -
(i) "animal feed supplements" means an ingredient or combination of ingredients, added to the basic feed mix or parts thereof to fulfill a specific need, usually used in micro quantities and requiring careful handling and mixing;
(ii) "animal feed concentrates" means a feed intended to be diluted with other feed ingredients to produce complete food of optimum nutrient balance'"
(Notification No. 6/84-C.E. dated 15th February, 1984).
16. The Supreme Court thereafter expressed its agreement with the view of the Bombay High Court given in the case of Glindia Ltd. v. Union of India (1988) 36 ELT 479, wherein it was held that the terms "cattle feed' and "poultry feed" must include not only that food which is supplied to the domestic animals or birds as an essential ration for the maintenance of life but also that feed which is supplied over and above the maintenance requirements for growth or fattening and for production purposes, such as for reproduction, for production of milk, eggs, meat, etc., or for efficient output of work. In my view the above ratio laid down by Supreme Court should be read in the context in which it was so laid down. It is confined to the phrase animal feed as mentioned in the relevant entry. "Animal feed supplements" and anssal feed concentrates" were expressly included in the definition of animal feeds. The Explanation II thereof says what are animal feed supplements and animal feed concentrates. They also include such ingredients which are added to the basic feed mix. The position is not so in the notification No. 7038 and 3714 dated 31/1/1984 and 5/6/1.985, respectively, under our consideration. The observations made therein are not applicable wherein the Legislator has given different meaning to the phrase "cattle fodder". The phrase cattle fodder under the U.P. Trade Tax Act should be read in the light of the items enumerated therein. Under the U.P. Trade Tax Act, no doubt an inclusive definition of "cattle fodder" has been given in the said notification, which has been held by the Supreme Court it has been used in the generic sense. But cattle fodder shall take colour from items like chuni, bhusi, chilka,chokar etc. mentioned in the notification. Such article or thing which is alike to or akin to fodder and fed to an animal may be treated as cattle fodder. It is difficult to hold that vitamins or such products which are admixture of chemicals, salt and minerals would also be treated as cattle fodder.
17. As pointed out above, the appellate authorities without noticing the distinguishing features of the case have committed illegality in holding that the items in question are cattle fodder simply on the ground that the cattle fodder in the notification has been used in a generic sense. To this extent the order of the appellate authorities can not be approved and they are thereby set aside. Since there is no bifurcation of the turnover of cattle feed claimed as cattle fodder and that of poultry feed, it is desirable that the matter may be remanded back to the Tribunal to find out the turnovers of these two items separately.
18. So far as the question of balanced poultry feed is concerned, a Division Bench of this Court in the case of Friends Medicon (P) Ltd v. State of U.P. and Ors., 1997 NTN (Vol 10) 384 has held that entry No. 5 relating to 'balanced poultry feeds" in the notification dated 31st January, 1995 includes the poultry feed supplements or concentrates. In view of the aforesaid authoritative pronouncement by a Division Bench of this Court it is held that the turnover of poultry feed is not liable to be taxed for the years under consideration. The order of the Tribunal to this extent being in conformity with the aforesaid judgment calls for no interference by this Court.
19. In view of the above discussion, both the revisions are hereby allowed in part and the matter is remanded back to the Tribunal to determine the turnover of such manufactured items, treated by the dealer/opposite party as cattle feed and tax them accordingly. The turnover of balanced poultry feed is not liable to be taxed. No order as to costs.